there hasn't been anything yet on t.v. . it is to get the maximum ridicule that. the material is for hopes journalism and we. we want to present. something real. good afternoon and welcome to capital account i'm more in the story here in washington d.c. these your headlines for thursday may twenty fourth two thousand and twelve question for you what is your favorite record that plan everyone evidently has one now since that term has been point the european central bank meanwhile is

reportedly working on the antithesis of plan a not a plan b. but with all of the discussion of doing this or doing that with central plan or crisis management be better served by doing nothing it's something i guess jim grant has said before we'll raise the specter of it again today with ed harrison who joins us in studio and all eyes are focused on every number and news item to come out of europe more generally no action from a meeting of euro leaders p.m.i. numbers showing big euro zone's economy contract ing meanwhile are people losing sight of the bigger picture of a global slowdown and is the u.s. going to be in worse trouble than it would be because of the easy distraction from domestic fiscal problems and there goes that crazy old j.p. morgan again take a look. and

there j.p. morgan goes indeed acting like a greedy godzilla trying to go in and light an entire industry that effective ordinary people on fire all for a few extra quid we'll tell you why manufacturers are revolting this time against the banks latest derivatives ploy and hey it's no wonder the u.s. banking industry just reported as high as quarterly earnings in years we'll talk about it let's get to today's capital account. all right allow me if you will to level with you guys for a moment because working in broadcast media i have to admit it is easy to get sucked into the vortex of the twenty four hour news cycle with all of its spin it's

nonsense it's a manufactured sense of urgency the world is of course infinitely more complex than anything we can express in thirty minutes on this show yet we keep trying day after day and today the major financial news outlets have again turned their focus to europe the economic downturn there has persisted for some countries going on five years with of course no end in sight talk of a greek exit the grex it as it has been dubbed is the talk of the town quote unquote will greece exit the euro what will this mean for other economies for people of europe for people of the world now we look at charts at numbers at fancy statistics that tell us whether we grew by half a point here or contracted by a quarter of a point there today we learned that the euro zone member economies jointly contracted this month at the fastest pace in almost three years so some will ask what does this mean or why did this happen but the media always seems to circle

back to this same basic question we were talking about whether or not you should be stepping in to do more to support the eurozone what do i read then well the most important thing they have to do is convince investors that they are moving forward that there is some sort of game plan here because. they're talking of course about what policymakers will do shouldn't do but does this question begin from a false premise that a highly fallible human being sitting in ivory towers can somehow fix the lives of seven billion people simply by pushing the right policy levers by making a few extra loans or spending a few extra dollars here or euro's there one of the correct response as our guest jim grant has said before in the past would be to do nothing try that on for size just. maybe just once maybe the world and our policy overlords included should

spend less time doing and more time thinking about the mess we have all created with our attempts one after the other to fix this or to tweak that to do something believing that a handful of bureaucrats can steer and guide an entire mass of people their lives and their ambitions but we are not bureaucrats of course we're not policymakers or central bankers we are by force of profession obliged to think and reflect and occasionally offer our opinion it's all we can do for now so to help us do that is edward harrison founder of credit write downs thank you for being on the show edward good to be now i just want to reflect for a moment because you were on one of our very first shows which was months and months ago now it's been i think about seven months what do we talk about do you remember the problem with saying that we're talking about today exactly it was europe we have been in a suspended state of animation over this whole euro zone crisis i have to be honest

i'm sick of talking about it and it's always the same what are they going to do what should they do what shouldn't they do what aren't they doing at work at this point what about doing nothing well you know it's funny you say that you're sick of it that you the policymakers are sick of it and so eventually before you're back to the course of doing nothing of these two it's eventually going to happen is they're going to make an error you know they're in this constant state of stress trying to do something aventure the do the wrong thing that's going to blow up the whole system on and on and on eventually they're going to do the wrong thing right now they have a clean record they've never done anything wrong because sitting here i feel like net net they've been the problem they've been muddling through certainly but that hasn't been anything catastrophic we're not in a great depression we could. still get there if they continue down the same path

that they're going on and make a fundamental ok hold on because one thing that i want to ask is we're going through this information day after day that seems so catastrophic and material is what's going on materially changing and important on a daily basis or does it just feel like that because there's always a new number to parse or a new meeting to dissect it just feels like that but you know we are getting closer and closer to serious problems because you know the eurozone is fundamentally overindebted in the private sector the banks are under a cap was its exact same problem that we have had and still do have to certain degree in the u.s. and their solution which is to deflate the public sector at the same time that the private sector is already deflating is just going to lead to bank runs causing people to take their deposits out of institutions put them in

what they think are safer institutions maybe put them in a mattress take them out of the eurozone entirely and eventually you're going to get bank runs and then that's when the whole thing will start to become really a problem but right now i think it's just a simmering problem we've been here before we were there with italy just think about it in november we were talking about italy i wrote a post about what happens if italy defaults and you know i went through the scenario and all the see the us that are involved in that the bankruptcies in the bank runs etc and so for that i said serious policymakers are thinking about allowing this to happen obviously it would lead to another great depression so here we are again what happened with italy they came up with the goods they came up with the extend and pretend maneuver i think that's exactly going to see here again there's not going to be a greggs any time in the near future and we're going to continue on the same path until at some point something existential actually happens ok so as far as a status report. kate the debt deflation in europe what is the main main takeaway

of where we are right now where we are is the beginning of bank runs if the these accelerate then they're going to have to come up with some good from a sovereign perspective you know greece can be managed to a certain degree it's spain and italy that's where the rubber hits the road so sovereign it's spain and italy and then the bank runs those are the real concerns in the euro zone so what we've seen and greece with with millions of actually i mean billions more than a billion euro is being taken out of local banks and with concerns that we saw in bankia are those what you're worried about is are you doing rounds are you calling those bank runs right those are those are slow motion bank loans but real bank loans are actually happen a lot quicker when the bank runs really happened you think about northern rock for example or in the united states we had a bank run in two thousand and eight which precipitated some of the stuff in the first crisis that we had pretty limited but i think that you go back to one hundred

thirty one with from the austrian bank that there was a bank run on that created the preconditions for a generalized bank run so these are the sort of knock on effects that you would see and that's the kind of existential crisis that would really bring things to a head in europe exactly and you know the easy be they understand so as deflationary as the policy has been on the fiscal front in europe the e.c.b. has just been pumping money like into the banks trying to prop them up artificially obviously because they're bankrupt in order to prevent this so it's sort of an extend kind of maneuver in order to pretend that these institutions are solvent so that at some point later on when things were easier to do they can they can resolve their institutions that are still unsolved and you think back to the l.d.c. crisis. which basically happened as

a result of the the the double dip recession of eighty two in the united states these institutions in the u.s. that were exposed to the institutions in latin america were completely insolvent all of the big bags and so we extended this whole problem out with for another seven years until one thousand nine hundred. point that's when we had the savings and loan crisis and so you can extend these things for a very long time on right and then the question also is what are we overlooking in the meantime because we have been so focused on the play by play of this euro zone crisis not as much talk about other parts of the world is there a bigger picture that is being overlooked with problems brewing or slowdowns in asia or latin america or the us one hundred percent i think there is i mean you know. china the bubble has burst in their housing you know their economy is slowing down incredibly rapidly they're all everyone's talking about infrastructure

spending stimulus except for them to to counteract that india they're in a stagflation or environment inflation is still they have a huge amount of government debt seventy percent government debt to g.d.p. at the same time. they're not not too bad not going to their friends in the u.s. they're here for though. you know if you look at emerging economies there's probably a lower bar for that for the whole thing starts to become a problem then they have their currency which is actually depreciating it's an all time low versus the u.s. dollar brazil's also decelerating why why are some of those currencies falling against the u.s. dollar and the euro with all of the problems for example going on with the euro well it's because they have not decoupled at the end of the day people think that there's decoupling you know all these things in really you have the commodities cycle which i think is probably topped out. you know the commodity countries that

are dependent upon oil and commodities that ship out to china they're not as strong as they were were in the past they've started to cut their interest rates and so as a result their currencies have started to give way before we go to break some of these countries are talking about particularly china have been driving global growth at a time when the u.s. and europe either been very slow or contracting so what happens what is the impact on the global economy if they do slow down a bit if they see if they slow down then we have the sort of the sink when this slowdown that we had in two thousand and seven so any sort of major shock to the system will then took the whole thing into recession and you know in a redux all right when we come back we'll talk more about where we could end up beyond just europe but we'll still talk a little bit about it we have edward harrison founder of credit write downs after the break also still ahead who works more americans or europeans well one study says americans went out there and despite this another suggest americans are using

their vacation time i'll give you our three cents but first your closing market numbers. wealthy british style is not. the time to. market why not. find out what's really happening to the global economy with much stronger no holds barred look at the global financial headlines tune in to kaiser report on our.

welcome back we're talking to everett harrison about a year ago and what's being overlooked by focusing on the crisis every second that there is news or numbers or a meeting it was the eighteenth meeting of the zero euro zone leaders so let's get into what else is being overlooked as you were talking about emerging economies before the break what about the u.s. is this delaying a conversation in the u.s. that needs to happen a serious conversation about the u.s. deficit the u.s. debt i mean i don't know if you noticed but it looks like we're going to run up against a fiscal cliff again i hate that word fiscal cliff but basically another debt ceiling debate the fiscal cliff is the interesting thing actually just before you into the fiscal cliff it's interest that mexico is actually in latin america the country that's doing the best because they're associated with the united states in terms of the u.s. is pulling them up the u.s. as far as developed economies goes they're doing the best but when the fiscal cliff happens i think that if it actually does come to pass and we fall off the cliff

then you know that could be the exogamous shock that creates sort of a negative feedback loop with what's going on in europe in the emerging markets etc so yeah the fiscal cliff is something to watch so our politicians that are elected that category on anything could hold the entire world hostage the world economy in your view but you know let's take a step back i think it's about the philosophical view of what to do when there's too much debt yet at the end of the day you know you'll hear a lot of people on and on though say there's too much debt and that's that's the truth the real question is what do you do about that you know do you write these debts down do you make these banks that were lending recklessly insolvent or do you get in britain write it down make the banks suffer what's wrong with that i think that's really what most people would do but that's not what's happened yet and i think that you know we're starting to get frustrated with this with with this particular way of solving the problem. do you think europe is distracting

a more serious conversation about that in the u.s. about the debt overhang here from happening one is concerned about the the government debt overhang i'm concerned about the private sector debt overhang because the real problem in all of these countries including the us is private sector debt you know it's gone up three and four times the amount that it was a generation ago and it's clearly unsustainable the only reason that we've been able to run up so much that is because interest rates have gone down but we reach the end of the cycle in terms of interest rates you know we talk about the l.d.c. crisis eighty two but precipitated the l.d.c. crisis was volcker raising rates up to fourteen fifteen percent and since then you're saying there's a wrong thing and i've argued that that was what a great thing but at perceptive the old crisis and since that time we've been on the downward trend from there so we've had the you know till one in terms of interest rates the reason the hear people talk about quantitative easing all the

time is because it's because there's no other pain you have been addicted to it you know the market is addicted to it it's propping up the stock market rates with zero percent yet of interest rates would five percent you would see the fed cutting interest rates and the reality is with the end of the law in terms of you know this whole private sector leveraging but why don't you think that the public sector debt is a problem because i know that you don't and i know there's you know ideological reasons for that but what about when someone like kenneth rogoff comes out with research word that to him and carmen reinhart looked at fifty countries across twenty six periods of public debt overhangs where the government pushed g.d.p. debt to g.d.p. over ninety percent for at least five years and they found that the long lasting effects were real g.d.p. dropping an average of twenty five percent at the end of the deal leveraging period i mean not just want to obviously i realize it and then go and back there but i think that the answer is that. you know you really want to think about cause and

effect the cause was what you would call the malinvestment of the previous the private sector mal investment of the previous boom now we're in the bust and what happens when you have a bust when you're over leverage because of excess credit growth as people start to see more and when people start to save more the inner play between the private sector the external sector and the public sector means that more savings here is less savings there the external sector and the public sector have less so everything that's happened here must happen in exactly the exact proportion to the other side on the on the other side. the people are saying that they don't want the government to spend more money to have more deficit but they're essentially saying is they don't want the private sector to have more savings so the only way out of the private the the deal leveraging is to default to have more default to have the same level of savings in the private sector but more default to basically lower the

credit immediately which of course could precipitate a depression i mean this really there are few ways. you know you look like you're not exactly understanding what i am saying and i'm no it sounds a little jeffery here to me i honest let's say there are two people in the economy let's call me the public sector will call you the private sector and if you have if you have a surplus if you're saving more money than you're making. then i have a deficit does happen the private sector all almost always has a surplus and when the private sector has a surplus the public sector or the public sector in the trade sector in an open economy having a deficit that's exactly offset by that the reason you have a surplus is because there's an exact opposite deficit on the other side that's the way it works that's the national county so at that manti tucker talk you know that's the reality everyone will tell you that there's an. exact offset between

private and public you know the perfect example is if one particularly if we're in the same economy you have one hundred dollars that you spend and i only spend eighty dollars and we're spending to each other obviously there's a twenty dollar deficit surplus that's happening between you and me so the twenty dollars surplus or deficit that one of us has to be exactly offset by the other that's the rio there you go the reality of the u.s. situation all under five minutes thank you so much for terrorists and for educating me today and our audience hopefully too i appreciate being on the show that was edward harris and founder of credit write down.

all right let's wrap up with loose change dimitri janet and copper has been a hot commodity people are stealing it copper theft has been plaguing talent across america you can see laid out reports like this from joe tex kathy a large ac unit was taken early friday may eleventh that's around the same time a similar unit was stolen from harvey's hot dogs across the street much of the stolen copper from appliances can end up in scrap metal your art. and now even j.p. morgan wants in on the copper industry the bank is planning to launch an e.t.f. an exchange traded fund backed by physical copper according to the fantail times though u.s. manufacturers are opposed and they are revolting against the idea saying the products would grossly in artificially inflate prices and wreak havoc on the u.s. and the global economy yeah sounds about right for j.p. morgan of course they want to do this they're the in the business of creating

derivative missiles and this is another thing but this is like aircraft carriers and they're going to bring this thing and it's going to pump up this market what is the why is the average and i go into this thing that you use this is an industrial metal this isn't a pressure and you have this goes to the fact that they're looking for havens and why what are some brokerage merrill lynch know about copper nothing is going to sell you a suit is going to get you invest in it you're going to pump up the value of copper you're going to wreak havoc with this market and then you get these distortions ok . j.p. morgan going to mess and everything. everywhere don't make profit this is what these bankers do they manufacture derivatives this is drew that they're like you know what was much more money which is when you cannae and you know it and now make my christmas bonus and i'm going to say these the way the whale thing didn't work out let's sell some coffer let's move on to steady has got our attention we want to bring it to yours first americans work thirty percent more

than americans this study says that's largely due to america's lower taxes and higher divorce rates according to them i don't know if i buy that second americans don't seem to be taking any time off according to a poll conducted by harris interactive project blue take a look. about fifty seven percent of americans had unused vacation days at the end of twenty eleven and most left an average of eleven days on the table according to the financial information companies sage works employers aren't complaining their profits per employee are at a ten year high. unbelievable you know i have to admit i can relate to this story i'm one of those figures i haven't taken a day off this year and we're talking about the green room all right we both agree with this ok americans are over we're going to fisher this is ridiculous when you work people to the ground they don't take vacation time and then the people that work you have people that are unemployed or underemployed then you have people that

work like animals and the people that work like animals just burn out and get replaced by any number of those unemployed americans who are not efficient they're not through the job one is you decrease the value of the product you create burned out workforce unhappy people. that is being rude. by technocrats in brussels and washington and then you get this bubble of inequality and disequilibrium and explosions lots of explosions and well it's obviously working so i have to. go over here. because the system yeah you know you haven't they're going to be shamed by the herd anyway you take lots of occasions lower and a lot of guys they get a vacation ok all right our on the ground we're going to i'm being defamed let's move on i have not we hear a lot about some symbols what we do know is the deficit deal that didn't really go anywhere in congress officially but it was it was aimed at reining in the u.s.

deficit what we don't hear about is how awesome lee candid simpson one part of simpson bowles has become post public service here he is here's a snippet of him arguing with a host of the young turks. you're destroying the social security system assure them in your pipe and. i'm sure you. know nothing that is not and not just the tip of the iceberg go google this guy he's hilarious but quickly now he has introduced words for the california alliance of retired americans who have come out against in simpson bowles their senior citizen group take a look at what he said this is part of it what a wretched group of seniors you must be to use the faces of the very people that were trying to say because i guess they used some young people on their pamphlets while the greedy users like you use them as a tool and a front for your nefarious bunch of crap you must feel come such

a shame for showing out there's bowl there really good answer it's so i mean we can just leave what can we say after that he won't know rolled it up in smoke the well all right go read the report that's always what he comes back to i'm going to go do that now because we're out of time that's all we have time for today thank you so much for watching and please make sure to come back tomorrow. in the meantime you can follow me on twitter at war and lester give us feedback on the show at youtube dot com slash capital account and also see at any age on hulu hulu dot com das kapital account from everyone here thanks for watching and have a great night. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else you hear or see some other part of it and realize that everything you thought

you knew you don't know i'm tom parker is a big check. download the official location. i pod touch from the. life on the. video. old costs.